Reserve Bank of New Zealand Engineers a Fourth Interest Rate Hike, Then Declares a Pause

July 24, 2014

As it had done at the three previous meetings, the RBNZ lifted New Zealand’s Official Cash Rate by 25 basis points.  The new 3.5% level compares with 2.5% during the three years to mid-March, and now it is time to put policy on pause for “a period of assessment before interest rates adjust further towards a more-neutral level.  The speed and extent to which the OCR will need to rise will depend on the assessment of the impact of the tightening in monetary policy to date, and the implications of future economic and financial data for inflationary pressures.”  The other notable sentence for Governor Wheeler’s statement protests more harshly than before the firm level of the kiwi:  “With the exchange rate yet to adjust to weakening commodity prices, the level of the New Zealand dollar is unjustified and unsustainable and there is potential for a significant fall.”  Central bank officials have revised down projected 2014 GDP growth slightly to 3.7%, and CPI inflation is currently near the lower end of the 1-3% target range.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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